DOCTRINE OF ACCUMULATION
Give a detailed account of the doctrine of accumulation of income.
When direction is void (Sec. 17(1))
Sec. 17 of the Transfer of Property Act applies to transfer where the property and the income arising from the property are seperated by the transferor while effecting a transfer and the transferee is directed not to spend the income but accumulate it for specific or a non specific period. Where the direction of a transfer of property is that the income arising from the property is to be accumulated for the period longer than the life of the transferor or a period of 18 years such direction for accumulation of income would be void and can be validly ignored by the transferee for the period.
If the direction is for period longer than the life of the transferor or a period of 18 years, the direction is to be modified, so as to reduce it to the aforesaid period. At the end of the said period, the accumulated income and the property will be disposed of as if the entire period for which accumulation was directed by the transferor has expired.
X transfers his property to Y in 1955 with a direction that the income arising out of the property be accumulated for a period of 20 years. X dies in 1958, the maximum period for which the income can be accumulated would be 1958 plus 18 i.e., 1976 after which Z is free to use the income as he wishes.
The basis underlying this principle that as Land is to be enjoyed by the profit that arise out of such a land and just as law prevent the restraint on alienation. So also law disfavour any attempt to prevent the income being enjoyed by the owner of the land and for the time being. So such accumulation of income is not allowed under sec. 17. It means direction of accumulation of income is valid if it is first up to the life of the transferor or second up to the period of 18 years from the date of transfer.
When such directions is valid (Section 17 (2))
The direction for accumulation of income beyond the period of the life of transferor or a period of 18 years is valid, if such direction is for the purpose of
a) The payment of the debts of the transferor
b) The provision of portions for children or remoter issue of the transferor
c) The preservation and maintenance of the property transferred
d) Where the property is transferred for the benefit of public or any other object beneficial to mankind.